A long term loan is a form of debt that has a fixed and extended time frame. Usually, those loans which can be repaid after more than one year are called long term loans. It is not necessary that only an individual can avail of a long term loan. Even businesses can take such loans for their working capital needs like purchasing assets, inventory or equipment. These earning assets are then used to create additional income for the business.

A loan is a specified amount of money that one borrows with the intention of paying it back. It is paid back within a period of time that is agreed between both parties, the lender and borrower. A borrower must also pay interest that is determined at a certain rate on the principal amount. There are two major categories of loans: short term and long term.

The name itself says that such loans are given only for a long duration. Some common examples include mortgages, student loans, wedding loans, start-up loans, and home improvement loans. Long term loans are credit based. It is dependent on your credit history and credit score. A credit report keeps a track of your credit behavior and influences a lender's offer. So the better your credit score, the lower your interest rates will be.

A long term loan may be secure or unsecure. A secured loan requires you to attach some collateral or asset, such as a title to your home or car. That means you have to own that home or car. If you live in a rented unit or use a leased car for work, you cannot attach these as they are not your own. In the event of you defaulting on your payments, your lender cannot get back his money as they do not belong to you. In comparison, an unsecured loan does not require any assets, though you may have to shell out a higher sum of interest money. Lenders undertake a huge risk with unsecured loans, hence the higher interest rate is a precautionary measure.

To take long term loans, you will usually have to approach a bank or credit union, unlike a short term loan. Your credit history and current income will dictate the amount of loan you are offered. Long term loans also have great features like flexibility of payment options. For example, fixed interest mortgages carry a fixed rate till the end of the term, whereas variable interest mortgages vary with the market trends. Unlike short term loans, however, loans with a long term help to establish credit.

Who can borrow long term loans?

Anybody can apply for long term loans with a lender. Be it an individual or established business, both may need money for their long term needs. An individual may need to borrow for buying a house or car, or even for his or her wedding.

A business may feel a working capital crunch anytime. Working capital is the lifeblood of the business. It can be viewed as the 'equity' the business has in its current assets. While short term loans can be used for financing the growth of accounts receivable or inventory, long term loans can be used for financing of fixed assets like inventory or equipment.

What do I need to know before borrowing long term loans?

It's worth remembering that long term loans are not the right choice in every situation. Before taking a long term loan, it's important to understand how the system works. When they are right, they can prove valuable in the long run. Here are 5 things you should keep in mind before borrowing a long term loan.

1. Not Appropriate for Small Amounts-
The purpose of long term loans is to let you borrow tens of thousands of pounds against your property. As is the case, secured lending is used to finance high-cost needs. If you need only a small amount of money, say £5,000 or less, a short-term personal loan or credit card is the right choice.

2. Representative Interest Rates are just That-
A representative interest rate advertised by lenders is just for reference purposes. It is the rate that will be offered to about 51% applicants they approve. The remaining 49% may receive an offer with a higher rate.

3. Lock-in and Repayment Penalties can Hurt-
If you decide to pay off a loan earlier, you may be charged early repayment penalties.

4. Credit Rating matters-
The best part about long term loans is that even people who have a fair credit history can get long term loans for bad credit.

What are the benefits of long term loans?

Long term loans are preferred by many because they have quite a few benefits. Secured long term loans usually have very low interest rates as they are low risk. This means that repaying the loan is easy in the long run. As for businesses, interest paid on long term loans is tax-deductible which reduces the overall cost of repayment.

A business usually issues equity if it needs funds. This distributes the ownership of the company among a huge number of shareholders. However, borrowing a long term loan instead of issuing shares helps with 100% ownership. These loans, if repaid in time, can also improve a business' credit rating.

What are the risks associated with long term loans?

The biggest risk with loans of a long duration is the security it gives to the lender. If you default on your payments, the lender can take possession of your asset. Thus, you may end up losing your home or car. As for businesses, repayment of debt can be an issue when the business is just starting out.

Are there long term loans for bad credit?

Firstly, there is no such thing as a "bad credit loan". Bad credit means that a person's credit score is less-than-perfect. Every UK citizen has a credit file that contains his credit score. The credit score keeps on changing depending on good or bad credit behavior. Good credit habits like making timely payments, not borrowing large amounts can improve your credit score. Bad credit habits like missing payments, making late payments can seriously dent your credit score. However, the terms ‘good' and ‘bad' mean different things to different lenders. While you may not be eligible for a loan with a lender, another lender may actually be looking for people like you. Such lenders are often willing to offer long term payday loans for bad credit as well.

There are plenty of people who have found themselves denied a loan due to a bad credit score. They may not get access to some loan types, or may be given less favourable loan terms. It is often difficult for people to acquire long term loans for bad credit. But it is not impossible. If an individual has worked hard on getting their finances back on track, they may find that a lot of options open up for them. If you have a history of poor credit, be sure to choose your lender and loan type wisely.

What is long term loans no credit check?

A credit check involves checking an applicant's credit history and credit score. Most banks check their applicants' credit background before starting the approval process. Some with a very poor credit score may be denied loans altogether. Whatever the reason, there are a handful of lenders who are ready to give the option of ‘long term loans no credit check'. This is most helpful to those who have been working on improving their credit rating. Long term loans no credit check is best if you want to save time, money and peace of mind.

What are long term payday loans?

Payday loans are loans for a relatively small amount of money that are lent at a high rate of interest. The borrower, while taking the loan, agrees to repay when he receives his next paycheck. Payday loans are usually used to tide over an emergency situation. They are usually short-term, but some lenders offer long term payday loans. Added to that, even if you have a poor credit history, you are eligible for ‘long term payday loans for bad credit'. You can search the Web for long term payday loans direct lender. If you are looking for a payday loans lender who does not charge you even a penny, you should look for long term payday loans no fees.